Case Study – SB sets out its Strategic Vision
This case study is not based on a factual organisation.
Background
SB is a global technology company headquartered in Washington State, USA. Traditionally it developed and provided a wide variety of hardware components for clients/customers. Its strategy was to provide low cost, value products to as wide a worldwide customer base as possible.
However, as part of its development strategy it has sought to diversify into Software and Mobile systems through acquisition and partnership.
It is also looking to develop high value bespoke software products for specialist clients although at present it does not have this competency.
The new Vision is to build an organisation which delivers a totally integrated quality Technology system to its clients and customers.
In support of its traditional global operations it has outsourced much of its hardware manufacturing to the Far East. The existing outsourcing contracts end in October 2019.
Manufacturing has been traditionally driven by low cost criteria which has driven the outsourcing to the Far East because of lower labour costs. Quality issues have been an issue in some parts of the out sourced manufacturing bases but there have been signs of improvement in this regard over the past two years. Some limited manufacturing has been retained in a number of sites in the USA, the UK and Continental Europe.
SB has a European product development centre located in Western Europe and a supporting centre of engineering excellence also based in Europe.
The Company is currently structured on a functional basis but there are doubts as to whether this is appropriate for the diverse business along with the increasing focus on project delivery.
Strategic change
The new vision has led to the development by the board of a series of interrelated projects to ensure diversification, increased market share, new products and reduced operating costs.
You as Head of Strategy have been asked by the Chief Executive who chairs the new programme board to take on the role of Chief Programmes Officer as a secondment for the length of the programme and research the Programme and Project Challenges identified in the scenario
The key change projects which underpin the delivery of this vision are:
A. Acquisition of WN
SN has generally expanded its operations through acquisitions and internal growth. This strategy has inevitably led to rationalisation and consolidation of existing and new businesses. The key being to ensure continuous product development and improved market share through low cost production and sourcing.
SB, as part of its business strategy, has recently agreed to purchase a large integrated Mobile Phone Manufacturer WN in Europe to pursue a new diversification and development strategies building on its existing strengths as a low-cost producer. This organization has a large manufacturing and software development site in Europe and support functions and a small product/software development centre based in the USA. The acquisition is predicated on the basis that there were possible synergies and potential for added value across all SB’s business sectors especially in terms of integrated software. The Key competence being seen as the acquisition of software skills and product development. This also links with the proposed expansion into bespoke software development.
The aim being to further extend and deepen its competence in software development and also obtain competitive advantage from synergy between the traditional Computer Hardware Market and Mobile Technology. The Company Board have also seen the potential for potential cost savings from hardware and software development and manufacturing. The acquisition is subject to regulatory clearance from European Competition authorities and WN’s home base country which is concerned about loss of a strategic industry.
The integration of this acquisition is a key programme/project and the aim is to build on its success in its other operations with the integration of Hardware Manufacturing operations. However, there are unique challenges with this integration including location, Political Factors and achieving added value. The key factors it considered in pursuing this acquisition were its resources, capabilities and core competences. However, this major change programme needs to be successfully managed. The programme will include a series of projects allied to strategic objectives which will in impact staff in many sectors of the business. The current proposal is to merge the software development operations with existing product development operations in Western Europe. This includes the potential closure of WN’s existing a product/software development centre based in the USA but also people and structure changes within SB’s own product development centre. This programme needs therefore to be structured and managed to meet Stakeholders expectations and minimise disruption to business as usual. The Manufacturing options are also under consideration to determine any potential synergies, but this needs to be reviewed alongside the review of Outsourcing/In-house linked to current operations.
B. Manufacturing – Outsourcing/ In-house?
As part of its Cost focus and in support of all its current global operations SB developed its manufacturing base in the Far East but as stated there have been quality problems which need to be resolved. It has therefore re-shored to the US some manufacturing facilities and this has proved successful in terms of product quality but at higher cost. The project to establish the Manufacturing Facility over-ran in terms of time and cost and the implementation was poorly controlled, especially in terms of scope and requirements, and change management was poorly managed. It has raised further questions about the organisations ability to project manage change in line with strategic objectives. It is now however regarded as a successful business operation in support of the Core Businesses as quality has improved. It is also recognized that important key Lessons learnt from the implementation of this change need to be incorporated into any future projects and programmes.
The Manufacturing facilities of WN will have to be integrated and decisions made about the long-term location of these facilities. At the same time the Chief Financial Officer (CFO) is anxious that they retain the cost advantages from outsourcing to the Far East but is determined to avoid a high-profile project over-run and ensure quality if all Manufacturing is re-shored to the USA or relocated to any other location. The CFO is also concerned that whilst the business case for moving work from Far East to the USA is good, the proposed integration of WN’s manufacturing will result in loss of jobs in the host country and may be harmful to the Companies reputation in WN’s home country. It is important therefore to ensure that all stakeholders are involved and there is an adequate communication plan. The delivery of the vision will be severely impacted if any changes to the location are not well managed and integrated with the other changes in the strategy.
C. New Product Development – Software.
One of the key drivers of the Strategic change is to develop expertise in software development especially the interface with mobile technology and specialist bespoke software for other organisations. This is seen as one of the key initial deliverables from the strategic change programme. SB’s current Product Development organisation which covers both software and hardware is not large, but it is involved in an extensive portfolio of projects some of which have not been well delivered being over budget and late. There have always been challenges with managing the Software Development what is often seen as a peripheral business given its focus on Hardware Development. One important software project linked to a new release of Tablet Computers which is being delivered in partnership with an external consultancy, DDC, poses a particularly serious risk to the future because the roll out and development process has been poorly managed with limited user interface. It is seen as an important development for the company as it tries to consolidate its Hardware capability. This will be further complicated but potentially enhanced by the integration of the WN’s Product and Software Development business. Relationships within the development teams have traditionally not been effective in providing an integrated Hardware/Software Product.
The new Chief Operating Officer (COO), who is responsible for the Product Development Centre, has started to introduce Agile methods (Scrum) in order to improve system development project performance but the first attempt to use Scrum failed to gain the necessary commitment from the Development Partners. There continues to be issues with the delivery of the project. The new Chief Operating Officer (COO) has previously suggested that outsourcing is the best route to improving project delivery as well as driving down the cost of product development. The experience with the contract with DDC has not proved successful because although cost effective as it was let on a fixed price basis it has proved inflexible in terms of scope. These experiences need to be taken into account in any future procurements.
D. New Software Development Centre of Excellence
A further organizational project challenge is that the organization is considering building a new Software Centre of Excellence to consolidate all the expertise in one Location in Western Europe. It is looking to appoint a consultancy to advise on location, building design, financing and the construction. The new centre will consolidate the current locations to provide a more cost effective and much more pleasant work environment than the current set of buildings. It will also bring together operations from the acquisition of WN’s Development functions. The basis for the appointment of the consultancy is currently being discussed before going to the market to seek expressions of interest. SB are however particularly concerned about the contractual basis for the appointment of any consultancy given their experience with DDC on Product Development.
Programme Overview.
This programme of strategic change will involve a significant refocussing of the organisation’s operations, management, structure and locations. These will need to be implemented as part of the programme.
The timescales for these changes mean that this Programme needs to be completed within the next 2 years given the scale of changes. It is important that a set of key milestones are given for the board to measure progress. This is particularly important because the new centre of excellence will depend upon the successful integration of product/software development.
All these changes need to be managed and the board has decided that it is essential to adopt a structured Programme and Project Management approach. The company recognizes the need to improve business and programme, project and portfolio management (P3M) performance significantly. In addition to the projects discussed above it has a number of other key projects to complete in order to compete in its traditional hardware market. These will be made even more urgent by the recent acquisition. A recent review of projects across the company by a consulting firm using the P3M3® model concluded that the firm’s P3M capability was generally at Level 2. It is felt that to be successful in delivery they will need to move to Level 3.
It is important that you research how other organizations have approached the project/programme management of strategic change in support of your advice on ALL the points indicated above.
Tasks –
You have been asked by the Chief Executive who chairs the Programme Board to provide an initial report to SB considering the following key issues.
Part A – For part A you are required to write a 3,500-word consultancy report, in this case a programme plan, from which they could deliver this strategic business transformation. The report must cover the following:
1. Business Case/Programme Management- Identify and critically evaluate the key issues to be considered for the overall Strategic transformation programme and in particular provide detailed advice on the key Business Case issues relating to the Manufacturing Location options. How would you recommend these are assessed and managed through the delivery of the 2-year programme?
2. Programme Scope and Deliverables -Identify and critically evaluate the Programme Scope and Deliverables giving a detailed analysis of the Product Development project;
3. Estimating and Scheduling – Identify and Critically evaluate the estimating and scheduling issues/approaches for the Programme but also for each project noting the key differences;
4. Risk and Issues Management -Provide a justified Risk Management strategy identifying up to 5 key risks/issues and potential mitigation steps;
5. Programme Management Organisation, Governance and Stakeholders – Recommend how the organization should structure and organise for the good practice delivery and governance of the Programme considering its existing structures and challenges including the various projects? Identify and critically analyse the views of stakeholders especially in respect of the outsourcing/location of Manufacturing?
6. Programme Control – Identify and critically evaluate the Programme Control methods for managing the transformation and justify your choices. Show how would you approach the development of a detailed plan and identify key milestones for the Programme.
7. Contracting and Supplier Management – Critically evaluate the options for procuring, supplier selection and contracting the consultancy Contract for the Centre of Excellence.
It is important that you research how other organizations have approached the project/programme management of strategic change in support of your advice on ALL the points indicated above.
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Part B – For part B, to support delivery of the projects and the programme you are required to write a 750-word consultancy report. This separate report should identify how you would recommend that the company organizes and manages the strategic change based on recommended Best Practice Frameworks especially considering the P3M3 assessment. The report must:
i. Compare the advantages and disadvantages of two Project/programme Management Frameworks/Techniques of your choice in terms of how they would achieve improved management performance relating these to the case study
ii. Critically justify your choice of frameworks and analyse why they are relevant to the Case Study? Highlighting the challenges faced.
iii. Reflect on the choices and provide a clear recommendation for improving Project/programme Management Performance within SB.
